THE ITO, VAPI Ward -4., DAMAN V. SHRI RIPUL C DALAL, NANI DAMAN

ITA 1022/AHD/2003

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1774 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 08-12-2009
• Assessment Year: 1999-2000
• Appeal Filed On: 13-03-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N C AMIN
• Keywords: Depreciation; Reason to believe; Reassessment proceedings
• Section: 143(3); 142(1); 143(1); 250; 143(2); 264; 139(4); 147; 148; 154; 139

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, D-BENCH, AHMEDABAD. BEFORE: SHRI T K SHARMA, JUDICIAL MEMBER, AND SHRI D.C.AGRAWAL, ACCOUNTANT MEMBER. ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) INCOME TAX OFFICER, VAPI-WARD-4, DAMAN. VERSUS SHRI. RIPUL C. DALAL, PANCHAYAT ROAD, DUNETHA, NANI DAMAN. SHRI. RIPUL C. DALAL, PANCHAYAT ROAD, DUNETHA, NANI DAMAN. INCOME TAX OFFICER, VAPI-WARD-4, DAMAN. (APPELLANT) (RESPONDENT) PAN: NOT ALLOTTED FOR THE APPELLANT: SMT. VINOD TANWANI, SR. DR FOR THE RESPONDENT N.C. AMIN, AR ORDER PER D C AGRAWAL (ACCOUNTANT MEMBER): THIS ARE TWO CROSS APPEALS, ONE FILED BY THE ASSESSEE AND ANOTHER FILED BY THE REVE NUE AGAINST THE ORDER OF LD CIT(A) PASSED ON 27-12-2002 FOR THE A.Y. 1999-20 00. IN ITS APPEAL, ASSESSEE HAS RAISED FOLLOWING ISSUES. I. THE REOPENING UNDER SECTION 147/148 IS BAD. II. REASONABLE OPPORTUNITY IS NOT PROVIDED WHILE PASSIN G UNDER SECTION 143/147. III. LD CIT(A) HAS ERRED IN ONLY DELETING THE ADDITION O F RS. 80,000/- OUT OF THE TOTAL ADDITION OF RS. 2,10,520/ - MADE ON ACCOUNT OF OPENING CAPITAL. IV. LD CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 1 ,40,000/- OUT OF UNSECURED LOANS. V. LD. CIT(A) ERRED IN RETAINING ADDITION OF RS. 20,00 0/- OUT OF EXPENSE CLAIMED IN THE PROFIT AND LOSS ACCOUNT. 2 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) VI. THEN ISSUES REGARDING CHARGING OF INTEREST UNDER SE CTION 234B, 234C, INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(C). 2. IN DEPARTMENTAL APPEAL, DEPARTMENT HAS CHALLENGE D DELETION OF ADDITIONS OF RS. 80,000 MADE ON OPENING CAPITAL AND OF RS. 1,13,080/- MADE ON ACCOUNT OF UNEXPLAINED REPAYMENT OF LOAN AN D FINALLY AGAINST DELETION OF ADDITION OF RS. 39,455/- OUT OF RS. 59, 455/- MADE ON ACCOUNT OF DISALLOWANCE OF EXPENSES. 3. THE FACTS OF THE CASE ARE THAT ASSESSEE HAS EARN ED INCOME FROM ELECTRICAL LABOUR CONTRACT. RETURN OF INCOME WAS F ILED ON 07-04-2000 ON AN INCOME OF RS. 52,560/-. SUBSEQUENTLY, NOTICE UN DER SECTION 148(1) WAS ISSUED ON 31-05-2001 IN RESPONSE TO WHICH ASSES SEE DID NOT FILE ANY RETURN OF INCOME. THE ASSESSING OFFICER ISSUED NOT ICE UNDER SECTION 142(1) ON 02-05-2002 REQUIRING ASSESSEE AGAIN TO FU RNISH RETURN OF INCOME ON OR BEFORE 13-05-02 AND FURTHER DETAILS AS PER ITS LETTER ISSUED ON 19-06-2002. IT SEEMS THAT NO DETAILS WERE FILED ON THE GROUND THAT ASSESSEE WAS CONFINED IN SUB-JAIL DAMAN. IN ANY CA SE NO DETAILS AS REQUIRED BY THE ASSESSING OFFICER FILED, THE ASSESS ING OFFICER ISSUED NOTICE UNDER SECTION 142(1) TO THE FATHER OF THE AS SESSEE, BUT BOOKS OR ACCOUNTS OF DETAILS WERE NOT PRODUCED. THE ASSESSI NG OFFICER THEREAFTER EXAMINED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE RETURN FILED ON 07-04-2000 AND PROPOSED FOLLOWING ADDITIONS. [1] ALLEGED OPENING CAPITAL RS. 2,10,520/- [2] ALLEGED UNSECURED LOAN RS. 1,40,000/- [3] REPAYMENT OF LOAN RS. 1,13,080/- [4] EXPENSES RS. 59,455/- RS. 5,23,055/- TOTAL INCOME RS.5,75,615/- (ROUNDED TO. RS.5,76,620) 3 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) 4. THE LEARNED CIT(A) EXAMINED EACH ISSUE AND GAVE FINDINGS AS UNDER: 4.1 REGARDING ADDITION OF RS. 2,10,520/- BEING OPEN ING CAPITAL, NOT ACCEPTED BY THE ASSESSING OFFICER, LD CIT(A) FO UND THAT ASSESSEE HAS NOT FURNISHED ANY SUBSTANTIAL EVIDENCE TO SHOW THAT IT HAS RUN THE BUSINESS IN ELECTRICAL GOODS. WHATEVER IS FURNISHED BY THE ASSESSEE IS ONLY SELF SERVING. HOWEVER, TAKING A PRAGMATIC VIEW, HE ACCEPTED OPENING CAPITAL OF RS. 40,000/- I N RESPECT OF PURCHASE OF SHOP AND OF RS. 40,000/- IN RESPECT OF CLOSING STOCK OF ELECTRIC GOODS. HE ACCORDINGLY, DELETED THE ADDITI ON OF 80,000/- AND CONFIRMED THE ADDITION OF RS. 1.30,520/-. 4.2 REGARDING ADDITION OF RS. 30,000/- MADE U/S 68, LD. CIT(A) CONFIRMED THE ADDITION ON THE GROUND THAT NO EXPLAN ATION IN RESPECT OF 7 PARTIES FROM WHOM LOAN WAS SHOWN TO HAVE BEEN TAKEN WAS FILED IN SUPPORT OF THE IDENTITY OF THE LENDERS AND THEIR FINANCIAL CAPACITY AND GENUINENESS OF THE TRANSACTIONS. 4.3 REGARDING ADDITION OF RS. 1,13,080/- MADE U/S 6 9C BEING THE UNEXPLAINED REPAYMENT OF LOAN, LD CIT(A) FOUND THAT ASSESSEE HAS RECEIVED RS. 30,000/- FROM CELLAR OF THE JEEP CAR T HROUGH CHEQUE AS REFUND, FURTHER ASSESSEE HAS RECEIVED SUM OF RS. 26 ,540/- IN CASH BEING CASH FLOW FROM THE BUSINESS OF THE ASSESSEE. THIS SUM WAS DEPOSITED BY THE ASSESSEE IN GOA ESTATE COOPERATIVE BANK. FURTHER, ASSESSEE HAD DECLARED AN INCOME OF RS. 52, 560/- IN THE CURRENT YEAR. THUS, BOTH THE SUMS TOGETHER WOULD E XPLAIN THE RETURN OF MONEY TO THE CREDITORS. HE ACCORDINGLY, D ELETED THE ADDITION. 4 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) 4.4 REGARDING DISALLOWANCE OUT OF EXPENSES, LD CIT( A) NOTED THAT TOTAL EXPENSES CLAIMED WERE RS. 1,18,910/- AND ASSESSING OFFICER HAS DISALLOWED 50% WHEREOF AT RS. 59,455/-. CONSIDERING THE OVERALL CIRCUMSTANCES, LD CIT(A) CONFIRMED THE ADDITION OF RS. 20,000/- AND DELETED THE REST. 5. LD. AR FOR THE ASSESSEE SUBMITTED THAT REOPENING OF THE ASSESSMENT IS BAD, BECAUSE RETURN FILED BY THE ASSESSEE ON 07- 04-2000 REMAINED PENDING AND IN THE MEANTIME NOTICE UNDER SECTION 14 8 HAS BEEN ISSUED. THUS, THE VALID RETURN WAS ON RECORD FOR MAKING ASS ESSMENT UNDER SECTION 143(3) WHICH COULD BE DONE BY 31-3-03. THEREFORE N OTICE ISSUED ON 31- 05-01 WAS NOT LEGAL. HE REFERRED TO THE FOLLOWING JUDGMENTS. 1. TRUSTEES HEH THE NIZAMS SUPPLEMENTED FAMILY TRUS T VS. CIT 242 ITR P.381 2. KESRIMAL (DECD.) V.S. ITO 264 ITR PAGE 119 3. INDIAN OIL CORPORATION VS. ITO 159 ITR PAGE 956 4. JHUJHUNWALA VANASPATI LTD. VS. ACIT (NO.2) ALLAH ABAD 266 ITR PAGE 264. 6. ONCE RETURN FILED ON UNDER SECTION 139(4) ON 07- 04-2000 WAS PENDING AS NO ASSESSMENT WAS MADE ON THIS RETURN, T HEN THERE IS NO QUESTION OF INCOME HAVING ESCAPE ASSESSMENT. THERE FORE ISSUANCE OF NOTICE UNDER SECTION 148(1) WAS NOT VALID. FURTHER , ISSUANCE OF NOTICE UNDER SECTION 143(2) IS MANDATORY WHICH SHOULD HAVE BEEN ISSUED BEFORE EXPIRY OF 12 MONTHS FROM THE END OF THE MONTH IN WH ICH THE RETURN IS FURNISHED. THE ASSESSING OFFICER CANNOT ISSUE NOTI CE UNDER SECTION 142(1) ONCE TIME PERIOD FOR ISSUANCE OF NOTICE UNDE R SECTION 143(2) HAS EXPIRED. REGARDING MERIT OF THE CASE, LD AR SUBMIT TED THAT ASSESSEE WAS IN JAIL, THEREFORE, HE WAS NOT ABLE TO SUBMIT ANY E VIDENCE WHEREAS LD DR 5 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) SUBMITTED THAT OPPORTUNITY WAS PROVIDED BY LD CIT(A ) TO FURNISH THE EVIDENCE, BUT IT WAS NOT FURNISHED. 7. AGAINST THIS LD DR SUBMITTED THAT TIME PERIOD FO R ISSUANCE OF NOTICE UNDER SECTION 143(2) HAS EXPIRED AND RETURN IS DEEM TO BE ACCEPTED. THEREFORE, NO PROCEEDING IS PENDING AND THEREFORE A SSESSING OFFICER WAS JUSTIFIED IN ISSUING NOTICE UNDER SECTION 148(1). FURTHER, ASSESSEE DID NOT FILE ANY RETURN IN RESPONSE TO NOTICE UNDER SECTION 148(1) THEREFORE, HE HAS NO RIGHT TO CHALLENGE THE ISSUANCE OF NOTICE SO ISSUED. THE DECISIONS RELIED ON BY THE ASSESSEE PERTAINED TO THE PERIOD W HEN LIMITATION FOR ISSUE OF NOTICE UNDER SECTION 143(2) WAS NOT PRESCRIBED. THEREFORE, THOSE AUTHORITIES WILL NOT BE APPLICABLE. LD. DR ALSO RELIED ON JUDGMENT OF TRIBUNAL IN KAILASH AUTO FINANCE LIMITED VS. DCIT ( 2009) 32 SOT 80 (ITAT, LUCKNOW) FOR THE PROPOSITION THAT ONCE RETUR N IS PROCESSED, THE ASSESSING OFFICER HAS AUTHORITY TO EITHER ISSUE NOT ICE UNDER SECTION 143(2) OR NOTICE UNDER SECTION 148(1) IF CONDITION LAID DOWN IN THOSE SECTIONS ARE SATISFIED. ON MERIT LD DR SUBMITTED T HAT LD CIT(A) WAS NOT JUSTIFIED IN GIVING THE RELIEF AS NO EVIDENCE WAS F URNISHED. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW, REOPENING OF TH E CASE IS JUSTIFIED. IT IS BECAUSE THE TIME PERIOD FOR ISSUANCE OF NOTICE UNDE R SECTION 143(2) HAS EXPIRED, AND THE RETURN WAS FILED 07-04-2000 AND TH EREFORE NOTICE UNDER SECTION 143(2) COULD HAVE BEEN ISSUED ONLY BY 31-05 -2001. SINCE, THE NOTICE UNDER SECTION 148(1) WAS ISSUED ON 31-05-200 1, IT IS NOT HIT BY THE AUTHORITIES REFERRED TO BY ASSESSEE. FURTHER WE AG REE WITH LEARNED DR THAT THOSE AUTHORITIES ARE APPLICABLE TO THE FACT MATRIX WHEN LIMITATION FOR ISSUANCE OF NOTICE UNDER SECTION 143(2) WAS NOT IN THE STATUTE. UNDER THE PRESENT SCHEME OF SECTION 147 A NOTICE UNDER SECTIO N 148(1) CAN BE 6 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) ISSUED ON THE BASIS OF DEEMED ESCAPEMENT OF INCOME WHICH IS PROVIDED IN EXPLANATION 2 TO SECTION 147 FOR THE SAKE OF CONVEN IENCE, WE REPRODUCE EXPLANATION 2 TO SECTION 147 IS AS UNDER:- EXPLANATION 2.--FOR THE PURPOSES OF THIS SECTION, THE FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARG EABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY:-- (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF AN Y OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED B Y THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOM E OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR REL IEF IN THE RETURN; (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT-- (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSES SED; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A R ATE; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCE SSIVE RELIEF UNDER THIS ACT; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR AN Y OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED. 14. CLAUSE-(I) OF THE EXPLANATION 2 IS APPLICABLE W HEN RETURN OF INCOME IS FURNISHED, BUT NO ASSESSMENT IS MADE. IT WILL I NCLUDE A SITUATION WHERE RETURN IS FURNISHED AND PROCESSED ALSO SITUATION WH EN RETURN IS FURNISHED AND NO ASSESSMENT U/S 143(3) IS MADE AND TIME PERIO D FOR ISSUANCE OF NOTICE UNDER SECTION 143 HAS EXPIRED. 7 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) 15. IN THIS REGARD WE REFERRED TO THE FOLLOWING POR TION FROM THE JUDGMENT IN KAILASH AUTO FINANCE (SUPRA). 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW, THE L D. AR IS PROCEEDING ON THE PRESUMPTION THAT A PROCEEDING WIL L CONTINUE TO BE PENDING BY VIRTUE OF RETURN FILED AND SUCH PRO CEEDINGS CAN ONLY BE TERMINATED BY ISSUANCE OF NOTICE U/S 143(2) AND PASSING OF ORDER U/S 143(3) OR AFTER EXPIRY OF TIME OF TWELVE MONTHS FROM THE DATE OF FILING OF THE RETURN. THE REASONING ADVANC ED BY THE LD. AR IS THAT A PROCEEDING IS PENDING BY VIRTUE OF RETURN FILED AND UNLESS SUCH PROCEEDINGS ARE CONCLUDED, THE ASSESSING OFFIC ER COULD NOT ISSUE NOTICE U/S 148(1). FURTHER, A PROCESSING OR SENDING OF INTIMATION IS NOT AN ASSESSMENT, THEREFORE, PROCEED INGS INITIATED BECAUSE OF FILING OF RETURN REMAIN PENDING. ONCE P ROCEEDINGS ARE PENDING, THE ASSESSING OFFICER CANNOT INITIATE RE-A SSESSMENT PROCEEDINGS. THIS IS THE GIST OF ARGUMENT. IN THI S CONNECTION, WE EXAMINE THE CONCEPT OF PENDENCY OF PROCEEDINGS AS U NDER: 16. THE TERM PENDING MEANS UNDECIDED I.E SOME THING WHICH IS NOT CONCLUDED. AN ACTION IS CONSIDERED AS PENDING FROM THE TIME OF COMMENCEMENT OF THE PROCEEDINGS. THUS, A LEGAL PRO CEEDING IS PENDING AS SOON AS COMMENCED AND UNTIL IT IS CONCLU DED. AS PER ADVANCED LAW LEXICON, THIRD EDITION OF 2005, PAGE 3 521/3522, FOLLOWING ARE THE DEFINITIONS OF THE WORD PENDING : A SUIT IS PENDING UNTIL FINAL JUDGMENT IS RENDER ED. SEE 3 IC61:5NLR88. AN ACTION IS PENDING UNTIL THE JUDGMENT IS FULL Y SATISFIED. A PENDING ACTION IS AN ACTION WHICH HAS BEEN COMME NCED, AND IN WHICH SOME PROCEEDING MAY BE TAKEN (SHERWOOD V. RAY ) (1837) I MOO. PC 353; HART V. HART, (1881) 18 CH D 670, 680; FORDHAM V. CLAGETT, (1882) 20 CH D 637, 653). SO LONG AS IT IS POSSIBLE FOR ANY PROCEEDING TO BE TAKEN IN A CASE, SUCH CAUSE IS STI LL PENDING (PER JESSEL, M.R., IN FORDHAM V. CLAGETT, SUPRA P. 653). FOR THE PURPOSES OF SEC. 24 (5) AND (7) OF THE JUDICATURE A CT, 1873, AND ACTION IS PENDING AFTER FINAL JUDGMENT SO LONG AS T HE JUDGMENT REMAINS UNSATISFIED. (SALT V. COOPER, (1880) 16 CH D 544). [A LEGAL PROCEEDING IS 'PENDING' AS SOON AS COMMEN CED (ON WHICH 8 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) SEE 5 REP. 47, 48; 7 REP. 30), AND UNTIL IT IS CONC LUDED, I.E. SO LONG AS THE COURT HAVING ORIGINAL COGNIZANCE OF IT CAN M AKE AN ORDER ON THE MATTERS IN ISSUE, OR TO BE DEALT WITH, THEREIN. PENDING JUDICIAL PROCEEDING. A JUDICIAL PROCEEDING IS SAID TO BE PENDING (A) IN THE CASE OF A CIVIL PROCEEDING, WHEN IT IS I NSTITUTED BY THE FILING OF A PLAINT OR OTHERWISE; (B) IN THE CASE OF A CRIMINAL PROCEEDING UNDER THE CODE OF CRIMINAL PROCEDURE, 1898, OR ANY OTHER LAW- (I) WHERE IT RELATES TO THE COMMISSION OF AN OFFENC E, WHEN THE CHARGE-SHEET OR CHALLAN IS FILED, OR WHEN THE C OURT ISSUES SUMMONS OR WARRANT, AS THE CASE MAY BE AGAINST THE ACCUSED, AND (II) IN ANY OTHER CASE, WHEN THE COURT TAKES COGNIZ ANCE OF THE MATTER TO WHICH THE PROCEEDING RELATES, AND IN THE CASE OF A CIVIL OR CRIMINAL PROCEEDING. [CONTEMPT OF COU RTS ACT. (70 OF 1971), S. 3 EXPLN. (A)] . 17. FROM THE ABOVE DEFINITIONS/CONCEPTS OF THE TERM PENDING , AN AUTHORITY IS REQUIRED STATUTORILY TO COMPLETE A PROCEEDING WHEN IT IS PENDING BEFORE HIM. THUS, UNLESS AUTHORITY/C OURT, BY OPERATION OF LAW, IS REQUIRED TO CONCLUDE THE PROCE EDINGS IT COULD NOT BE SAID TO BE PENDING BEFORE IT. IF WE EXAMINE THE NATURE OF THE PROCEEDINGS BEFORE THE ASSESSING OFFICER (COMMENCED BY FILING THE RETURN) IN THE LIGHT OF ABOVE DEFINITIONS, WE FIND THAT A RETURN FILED BY AN ASSESSEE AND PROCESSED BY THE ASSESSING OFFIC ER COULD NOT BE SAID TO BE PENDING BEFORE HIM AS HE IS NOT STATUTOR ILY REQUIRED TO CONCLUDE THOSE PROCEEDINGS. IT WOULD HAVE BEEN A D IFFERENT MATTER IF AFTER FILING OF THE RETURN OF INCOME, THE ASSESS ING OFFICER DOES NOT PROCESS THE RETURN. SUCH RETURN WHICH HAS COMMENCE D A PROCEEDING BEFORE THE ASSESSING OFFICER WOULD BE SA ID TO BE PENDING, BUT WHEN RETURN IS PROCESSED OR EVEN WHERE ACKNOWLEDGEMENT OF RETURN IS TREATED AS INTIMATION , IN THAT SITUATION, THE ASSESSING OFFICER IS NOT REQUIRED T O CONCLUDE THE ASSESSMENT PROCEEDINGS NECESSARILY. THEREFORE, IT COULD NOT BE SAID THAT A PROCEEDING IS PENDING BECAUSE OF THE RE TURN FILED BY THE ASSESSEE. A FRESH PROCEEDINGS WOULD COMMENCE AND BE PENDING WHEN NOTICE U/S 143(2) IS ISSUED. THUS, PROCEEDINGS CANNOT BE DEEMED TO BE PENDING BEFORE THE ASSESSING OFFICER B Y VIRTUE OF RETURN FILED AFTER ASSESSING OFFICER HAS PROCESSED THE RETURN, 9 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) DETERMINED THE TAX PAYABLE INCLUDING THE INTEREST O N THE RETURNED INCOME AND ALSO WHERE RETURN FILED BY THE ASSESSEE IS ACCEPTED BY WAY OF ISSUING ACKNOWLEDGMENT. MERELY BECAUSE THE ASSESSING OFFICER IS PROHIBITED FROM ISSUING NOTICE U/S 143(2 ) AFTER TWELVE MONTHS OF FILING OF THE RETURN, IT DOES NOT MEAN TH AT PROCEEDINGS COMMENCED WITH FILING OF A RETURN, ARE PENDING BEFO RE HIM. IN FACT AND IN LAW, PROCEEDINGS ARISING AFTER FILING OF THE RETURN IS A SEPARATE PROCEEDING AND PROCEEDINGS INITIATED AFTE R ISSUANCE OF NOTICE U/S 143(2) ARE SEPARATE PROCEEDINGS. IF NOTI CE/S 143(2) IS NOT ISSUED BY THE A.O, AND TWELVE MONTHS OF THE FILING OF THE RETURN IS EXPIRED, IT COULD NOT BE SAID THAT CONCLUSION OF AN Y PROCEEDING IS TIME BARRED BECAUSE SUCH PROCEEDINGS WERE NOT AT AL L INITIATED. IT IS ONLY THE COMMENCEMENT OF PROCEEDINGS U/S 143(2) ARE BARRED BY LIMITATION AFTER EXPIRY OF TWELVE MONTHS. SO FAR A S THE PROCEEDINGS INITIATED BY FILING THE RETURN OF INCOME IS CONCERN ED, IT HAS TO BE VIEWED INDEPENDENTLY. IT WILL COMMENCE WITH THE FI LING OF THE RETURN AND WILL COME TO AN END WHEN PROCESSING IS D ONE OR ACKNOWLEDGEMENT IS ISSUED DEEMING IT TO BE INTIMATI ON. IT CANNOT BE DEEMED TO BE PENDING AFTER PROCESSING OR ISSUANC E OF ACKNOWLEDGEMENT. THUS, PROCEEDINGS FOR ASSESSMENT HAS TWO METHODS OF INITIATION, ONE IS WHEN RETURN OF INCOME IS FILED AND THE OTHER IS WHEN NOTICE U/S 143(2) IS ISSUED. WHEN RE TURN OF INCOME IS FILED AND SUBSEQUENTLY NOTICE U/S 143(2) IS ISSUED WITHOUT PROCESSING OR ISSUING ACKNOWLEDGEMENT, THEN THE TWO PROCEEDINGS MERGED INTO EACH OTHER AND CONCLUDE WHEN ASSESSMENT ORDER U/S 143(3) IS PASSED. IN AN OTHER CASE, WHEN RETURN IS FILED AND IS PROCESSED/ACKNOWLEDGEMENT IS ISSUED TREATING IT AS INTIMATION, THE FIRST ASSESSMENT PROCEEDINGS GETS CONCLUDED. SO, T HE SECOND ASSESSMENT PROCEEDINGS ARE INITIATED WHEN NOTICE U/ S 143(2) IS ISSUED WITHIN TWELVE MONTHS OF FILING OF RETURN. THE LAW PROVIDES FOR THESE TWO PROCEEDINGS. THE THIRD PROCEEDINGS FOR ASSESSMENT IS INITIATED BY WAY OF ISSUANCE OF NOTICE U/S 148(1 ). THE STATUTE PROVIDES JURISDICTION IN RESPECT OF SECOND (BY ISSU ING NOTICE U/S 143(2)) AND THIRD PROCEEDINGS (BY ISSUING NOTICE U/ S 148(1)) TO THE ASSESSING OFFICER WHEN CONDITIONS LAID DOWN FOR THE M ARE FULFILLED. AS STATED EARLIER, THE FIRST SET OF ASSESSMENT PROC EEDINGS INITIATES WHEN RETURN OF INCOME IS FILED BY THE ASSESSEE. IN THIS REGARD, WE MAKE A REFERENCE TO SECTION 147 AS AMENDED WITH EFF ECT FROM 1.4.1989, AS UNDER: 147. INCOME ESCAPING ASSESSMENT.--IF THE ASSESSING OFFICER, HAS REASON TO BELIEVE THAT ANY INCOME CHAR GEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE 10 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 1 53, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF T HE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LO SS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS T HE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTE R IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS T HE RELEVANT ASSESSMENT YEAR): PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE R ELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THI S SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REAS ON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A R ETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB- SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DIS CLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT FOR THAT ASSESSMENT YEAR. EXPLANATION 1.--PRODUCTION BEFORE THE ASSESSING OFF ICER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVE RED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT T O DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROV ISO. EXPLANATION 2.--FOR THE PURPOSES OF THIS SECTION, T HE FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE IN COME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY:-- (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INC OME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE U NDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM A MOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDE RSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION , ALLOWANCE OR RELIEF IN THE RETURN; 11 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT-- (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSE D; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RAT E; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS ACT; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR AN Y OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED. 18. EXPLANATION 2 TO ABOVE SECTION CLEARLY PROVIDES THREE SITUATIONS WHERE IT IS DEEMED THAT INCOME HAS ESCAP ED ASSESSMENT AND THEREFORE, INITIATION OF ASSESSMENT/RE-ASSESSM ENT PROCEEDINGS BY ISSUE OF NOTICE U/S 148(1) WOULD BE VALID. THES E SITUATIONS ARE (I) WHEN RETURN OF INCOME IS NOT FILED AND THERE IS A CASE OF UNDER ASSESSMENT AS MENTIONED IN CLAUSE (A). (II) WHEN RETURN OF INCOME IS FILED AND ASSESSMENT IS NOT MADE AND THERE IS A CASE OF UNDER ASSESSMENT AS MENTIONED IN CLAUSE (B). (III) WHEN RETURN OF INCOME IS FILED AND ASSESSMENT IS MADE AND THERE IS A CASE OF UNDER ASSESSMENT OF INCOME AS MENTIONED IN CLAUSE (C). 19. THESE THREE CLAUSES COVER PRACTICALLY EVERY SIT UATION. THE ASSESSING OFFICER HAS ONLY TO SHOW THAT THERE IS A CASE OF UNDER ASSESSMENT AS MENTIONED IN EITHER OF THE THREE CL AUSES TO EXPLANATION 2 TO SECTION 147. THUS, WHETHER RE TURN OF INCOME IS FILED OR NOT, EVEN IF IT IS FILED ASSESSMENT IS MAD E OR NOT, WHAT HAS TO BE POINTED OUT IN THE REASONS RECORDED BY THE AS SESSING OFFICER IS THAT THERE IS A CASE OF UNDER ASSESSMENT. THE A RGUMENT OF LD. AR THAT CLAUSE (B) TO EXPLANATION 2 WILL COME INTO OPE RATION ONLY WHEN TIME PERIOD FOR ISSUANCE OF NOTICE U/S 143(2) IS EX PIRED AND ASSESSMENT IS NOT MADE, IS NOT ACCEPTABLE AS THIS WILL PUT ANOTHER CONDITION IN EXPLANATION 2(B) WHICH IS OTHERWISE NO T INSERTED BY THE LEGISLATURE. AS POINTED OUT EARLIER, STATUTE P ROVIDES COMMENCEMENT OF ASSESSMENT PROCEEDINGS IN AT LEAST THREE WAYS. THEY CAN MERGE INTO EACH OTHER BUT THEY DO NOT CANC EL EACH OTHER. ULTIMATE OBJECT IS TO MAKE ASSESSMENT OF CORRECT IN COME AND THEREFORE, LEGISLATURE HAS THOUGHT IT FIT TO CONSI DER COMMENCEMENT 12 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) OF ASSESSMENT OR RE-ASSESSMENT PROCEEDINGS IN AT LE AST THREE STREAMS WHICH CAN SUBSEQUENTLY MERGE INTO ONE, IF T HEY ARE PENDING AT THE SAME TIME. THEY WILL ULTIMATELY RES ULT IN AN ORDER U/S 143(3). A CASE WHERE ASSESSMENT PROCEEDING IS COMPLETED WOULD FALL IN CLAUSE (C). IN THE PRESENT CASE, WE ARE ONLY CONCERNED WITH THE OPERATION OF CLAUSE (B) TO EXPLANATION 2 A ND THIS CLEARLY PROVIDES THAT WHERE ASSESSMENT IS NOT COMPLETED, ST ILL THEN THERE COULD BE A CASE OF DEEMED ESCAPEMENT OF INCOME AND NOTICE U/S 148(1) CAN BE ISSUED IRRESPECTIVE OF THE FACT WHETH ER ASSESSMENT PROCEEDINGS INITIATED BY VIRTUE OF FILING THE RETUR N OR ASSESSMENT PROCEEDINGS BY WAY OF ISSUANCE OF NOTICE U/S 143(2) ARE CONCLUDED OR NOT. THUS, IN FACT, FOLLOWING SITUATION EMERGED FROM THE ABOVE DISCUSSION: (I) AFTER FILING THE RETURN OF INCOME, PROCESSING I S NOT DONE/ACKNOWLEDGMENT IS NOT ISSUED I.E RETURN FI LED IS PENDING. THUS, THERE IS A CASE OF ASSESSMENT HAVING NOT DONE. THIS WILL FALL IN CLAUSE (B) TO EXPLANATION 2 . (II) WHERE RETURN OF INCOME IS FILED, PROCESSING IS DONE/ACKNOWLEDGMENT ISSUED. THE PROCEEDINGS INITIATED BY WAY OF FILING OF RETURN IS CONCLUDED THOUGH TECHNICALLY, IT MAY NOT BE SAID TO BE AN ASSESSMENT COMPLETED AS HELD IN VARIOUS COURT JUDGMENTS. THIS WILL ALSO FALL IN CLAUSE (B) TO EXPLANATION 2. (III) WHERE RETURN OF INCOME IS FILED, PROCESSING I S NOT DONE/ACKNOWLEDGEMENT IS NOT ISSUED BUT NOTICE U /S 143(2) IS ISSUED. IF ASSESSING OFFICER STILL FINDS ESCAPEMENT OF INCOME THEN HE HAS TWO OPTIONS. HE CAN COVER SUCH ESCAPED INCOME IN THE PROCEEDINGS INITIATED U/S 143(2) OR HE CAN INITIATE PROCEEDINGS U/S 147 READ WITH EXPLANATION 2(B) AS ASSESSMENT IS NOT COMPLETE AND THERE IS A CASE OF DEEMED ESCAPEMENT OF INCOME. (IV) RETURN OF INCOME IS FILED, PROCESSING IS DONE/ACKNOWLEDGEMENT IS ISSUED AND THEREAFTER NOTIC E U/S 143(2) IS ISSUED WITHIN TWELVE MONTHS. SUCH CAS ES WOULD ALSO BE CASES OF DEEMED ESCAPEMENT OF INCOME IF CONDITIONS LAID DOWN IN EXPLANATION 2(B)ARE SATISFI ED. 13 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) (V) RETURN OF INCOME IS FILED, PROCESSING IS DONE OR NOT DONE, ACKNOWLEDGMENT IS ISSUED OR NOT ISSUED AS INTIMATION, THE TIME PERIOD FOR ISSUANCE OF NOTICE U/S 143(2) IS EXPIRED. THIS WOULD BE AGAIN A CASE WHIC H WILL FALL IN EXPLANATION 2(B) AS ASSESSMENT IS NOT DONE. (VI) WHERE ASSESSMENT IS DONE U/S 143(3) AFTER FILI NG THE RETURN OF INCOME AND ASSESSING OFFICER FINDS ESCAPEMENT OF INCOME THEN SUCH CASE WOULD FALL IN EXPLANATION 2(C). (VII) WERE NO RETURN OF INCOME IS FILED AT ALL THEN SUCH CASE WOULD FALL IN EXPLANATION 2(A). 20. HOWEVER, NOTWITHSTANDING ABOVE ANALYSIS OF EXP LANATION 2 TO SECTION 147, CERTAIN COURT RULINGS HAVE DEFINED THE PARAMETERS AS TO AND WHEN A CASE WOULD FALL U/S 147, THEREFORE , NOTICE U/S 148(1) WOULD BE VALID. 21. THEREFORE, WE REFER TO AUTHORITIES RELIED O N BY THE PARTIES. THE LD. AR HAS RELIED ON THE DECISION OF HON'BLE MA DRAS HIGH COURT IN THE CASE OF CIT VS K.M.PACHAYAPPAN (SUPRA) WHEREIN FOR THE ASSESSMENT YEAR 1997-98, RETURN OF INCOME WAS FILED ON 30.3.1999, THE RETURN WAS PROCESSED U/S 143(1) ON 1 5.3.2000 AND THEREFORE, THE ASSESSING OFFICER HAD ISSUED NOTICE U/S 148(1) ON 15.3.2000. IT WAS CLAIMED THAT ASSESSING OFFICER C OULD HAVE ISSUED NOTICE U/S 143(2) UPTO 31.3.2000, THEREFORE, ISSUA NCE OF NOTICE U/S 148(1) ON 15.3.2000 WAS NOT VALID AS PROCEEDINGS WE RE PENDING. THE HON'BLE MADRAS HIGH COURT RELIED ON THE DECISIO N OF HON'BLE SUPREME COURT IN THE CASE OF TRUSTEES OF H.E.H THE NIZAMS SUPPLEMENTAL FAMILY TRUST VS CIT , 242 ITR 381, WHE REIN IT WAS HELD THAT IF CONCERNED RETURN OF INCOME IS NOT DISP OSED OF THEN NOTICE U/S 148 COULD NOT BE ISSUED AND NO RE-ASSESS MENT PROCEEDINGS CAN BE INITIATED. 22. THE LD. DR SOUGHT TO DISTINGUISH THIS JUDGM ENT BY SUBMITTING THAT THE HON'BLE MADRAS HIGH COURT DID NOT CONSIDER THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ACIT VS RAJ ESH JHAVERI STOCK BROKERS PVT. LTD, 291 ITR 500, WHEREIN IT IS HELD THAT FAILURE TO TAKE STEPS U/S 143(3) WILL NOT RENDER THE ASSESS ING OFFICER POWERLESS TO INITIATE ASSESSMENT PROCEEDINGS EVEN W HERE INTIMATION U/S 143(1) HAS BEEN ISSUED. THE LD. DR FURTHER POI NTED OUT THAT THE HON'BLE MADRAS HIGH COURT HAS PASSED THE ORDER RELY ING ON THE 14 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF TR USTEES OF H.E.H THE NIZAMS SUPPLEMENTAL FAMILY TRUST VS CIT (SUPRA) WHICH RELATED TO THE ASSESSMENT YEAR 1962-63 WHEREI N THE CONCEPT OF ASSESSMENT WAS SOME WHAT DIFFERENT AS COMPARED TO THAT WHICH WAS IN VOGUE IN THE RELEVANT ASSESSMENT YE AR. FURTHER, SUBSEQUENT TO THE ASSESSMENT YEAR INVOLVED IN JUDG MENT OF NIZAMS CASE, THE PROVISIONS OF SECTION 147 AND EX PLANATION THERETO AS INTRODUCED WITH EFFECT FROM 1.4.1989 H AD ALTERED THE SITUATION AND CONCEPT OF DEEMED ESCAPEMENT OF INCOM E HAS COME INTO PLACE. WE ENTIRELY AGREE WITH THESE SUBMISSIO NS OF THE LD. DR. A PRECEDENCE BECOMES BINDING ONLY WHEN IT IS SIMILA R ON ALL FOUR CORNERS OF FACTS AND LAW. A SLIGHT DIFFERENCE IN F ACT OR IN LAW WILL NOT MAKE A VALID BINDING PRECEDENCE. IN THIS REGAR D, WE MAY REFER TO THE HON'BLE SUPREME COURT DECISION IN THE CASE O F PADMASUNDARA RAO (DECD.) & OTHERS VS STATE OF TAMIL NADU & OTHERS, 255 ITR 147 , WHEREIN IT WAS HELD THAT CIRCUMSTANTIAL FLEXIBILITY, ONE ADDITIONAL OR DIFFERENT FACT MAY M AKE A WORLD OF DIFFERENCE BETWEEN CONCLUSIONS IN TWO CASES. 23. IN VIEW OF THE ALTERED POSITION OF LAW WITH EFF ECT FROM 1.4.1989 WITH THE INTRODUCTION OF CONCEPT OF DEEMED ESCAPED INCOME WHICH SEEMS TO HAVE NOT ATTRACTED THE ATTENT ION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS K.M.PACHAYAPPAN (SUPRA), WE ARE OF THE VIEW THAT TH E CASE IS EFFECTIVELY DIFFERENTIATED BY THE REVENUE. 24. THEREAFTER, THE LD. AR RELIED ON CERTAIN AUTHOR ITIES OF ITAT, PARTICULARLY OF LUCKNOW BENCH. IN OUR CONSIDERED V IEW, AFTER CAREFULLY GOING THROUGH THESE AUTHORITIES WE FIND THAT THEY ALSO DID NOT HAVE THE BENEFIT OF THE DECISION OF HON'BLE SUP REME COURT IN THE CASE OF ACIT VS RAJESH JHAVERI STOCK BROKERS P . LTD,(SUPRA) AND ALSO DID NOT CONSIDER EXPLANATION 2(B) OF SECTI ON 147. THEY HAD BASICALLY CONSIDERED THE MAIN PROVISION OF SECT ION 147 AND HELD THAT BY FILING OF THE RETURN, AN ASSESSMENT PR OCEEDINGS REMAINED PENDING WHICH COULD BE CONCLUDED BY GETTIN G TIME BARRED AFTER EXPIRY OF TWELVE MONTHS AVAILABLE FOR ISSUANC E OF NOTICE U/S 143(2). THEREFORE, WE ARE NOT ABLE TO PERSUADE OU RSELVES TO FOLLOW THOSE DECISIONS. 25. THE LD. DR, ON THE OTHER HAND, REFERRED TO TH E DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ACIT VS RAJE SH JHAVERI STOCK BROKERS P. LTD, (SUPRA) WHEREIN THE HON'BLE SUPREME COURT HAS HELD AS UNDER: 15 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) SO LONG AS THE INGREDIENTS OF SECTION 147 ARE FULF ILLED, THE ASSESSING OFFICER IS FREE TO INITIATE PROCEEDIN G UNDER SECTION 147 AND FAILURE TO TAKE STEPS UNDER SECTION 143(3) WILL NOT RENDER THE ASSESSING OFFICE R POWERLESS TO INITIATE REASSESSMENT PROCEEDINGS EVEN WHEN INTIMATION UNDER SECTION 143(1) HAD BEEN ISSUED. 26. THIS VIEW WAS ALSO HELD BY THE HON'BLE P&H HIG H COURT IN THE CASE OF ADITYA & 279 ITR 47. IN THIS CASE, IT WAS HELD THAT WHERE ASSESSING OFFICER HAS SENT ONLY AN INTIMATIO N U/S 143(1) THEN ISSUANCE OF NOTICE U/S 148(1) WOULD BE VALID. 27. IN THE CASE OF ELEGENT CHEMICALS ENTERPRISES P. LTD VS ACIT, 271 ITR (AT) 56(SUPRA) THE TRIBUNAL, RELYING ON TH E DECISION OF HON'BLE A.P HIGH COURT IN THE CASE OF PUSA LAL, 16 9 ITR 215, HELD AS UNDER: THE LEGISLATURE IN ITS WISDOM HAS GIVEN TWO OPTION S TO THE ASSESSING OFFICER TO REOPEN ASSESSMENTS : (A ) ACCEPTING THE RETURN OF INCOME BY MERELY PROCESSING IT UNDER SECTION 143(1) OF THE INCOME-TAX ACT, 1961, WITHOUT MAKING INVESTIGATION, AND (B) TAKING UP THE CASE FOR SCRUTINY AND COMPLETING THE ASSESSMENT UND ER SECTION 143(3) OF THE ACT. MERELY BECAUSE THE ASSES SING OFFICER HAS TWO OPTIONS FOR REOPENING THE MATTER PROCESSED UNDER SECTION 143(1), NON-EXERCISE OF OPT ION UNDER SECTION 143(2) TO CORRECT THE ASSESSMENT MADE UNDER SECTION 143(1), DOES NOT EXCLUDE THE ASSESSIN G OFFICERS POWER TO REOPEN THE ASSESSMENT UNDER SECT ION 147 OF THE ACT. 28. IN THE CASE OF CIT VS ABAD FISHERIES , 258 ITR 641, THE HON'BLE KERALA HIGH COURT HAS HELD AS UNDER: SO LONG AS THE INGREDIENTS OF SECTION 147 OF THE INCOME-TAX ACT, 1961, ARE FULFILLED, THE ASSESSING OFFICER IS FREE TO INITIATE PROCEEDINGS UNDER SECTI ON 147 AND FAILURE TO TAKE STEPS UNDER SECTION 143(3) WILL NOT RENDER THE ASSESSING OFFICER POWERLESS TO INITIATE REASSESSMENT PROCEEDINGS EVEN WHEN INTIMATION UNDER SECTION 143(1) HAD BEEN ISSUED. 16 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) 29. THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF PRADEEP KUMAR, HAR SARAN LAL VS ASSESSING OFFICER, 229 ITR 46, HAS OBSERVED AS UNDER: THE SCHEME OF SECTION 143(1)(A) OF THE INCOME-TAX ACT, 1961, AND THE CLARIFICATORY CIRCULAR DATED OCT OBER 31, 1989, ISSUED BY THE CENTRAL BOARD OF DIRECT TAX ES, MAKES IT AMPLY CLEAR THAT UNLIKE THE PAST PRACTICE, ASSESSMENTS ARE NOT REQUIRED TO BE MADE IN EACH AND EVERY CASE AND ASSESSMENT ORDERS WILL BE PASSED ONL Y IN A VERY LIMITED NUMBER OF CASES, SELECTED FOR SCR UTINY. UNDER SECTION 143(1)(A), THE ASSESSING OFFICER HAS TO ACCEPT THE RETURN ON ITS FACE VALUE AND MAKE MINOR ADJUSTMENTS CONSISTENT WITH THE INFORMATION GIVEN I N THE RETURN WITHOUT TOUCHING UPON DEBATABLE AND CONTROVERSIAL ISSUES. THERE IS A LOT OF DIFFERENCE BETWEEN AN ASSESSMENT AND AN INTIMATION, AS CONTEMPLATED BY SECTION 143(1)(A) AND IF IT WERE NO T SO, THEN PARLIAMENT WOULD NOT HAVE USED THE WORD INTIMATION AS A SUBSTITUTE FOR ASSESSMENT. THE INTIMATION UNDER SECTION 143(1)(A)(I) IS ONLY FICTI ONALLY TAKEN AS A NOTICE OF DEMAND UNDER SECTION 156. FROM ALL THIS IT FOLLOWS THAT THE INTIMATION IS NOTHING BUT AN ACKNOWLEDGMENT SLIP TO THE EFFECT THAT THE RETURN F ILED HAS BEEN ACCEPTED AND THE ASSESSING OFFICER HAS ACT ED UPON THAT AND FOR THE PURPOSES OF RECOVERY, THAT SH ALL BE DEEMED TO BE A NOTICE OF DEMAND AS IF ISSUED UND ER SECTION 156. JURISDICTION TO MAKE ADJUSTMENT UNDER THE PROVISIONS OF SECTION 143(1)(A) IS CO-EXTENSIVE AND CO- TERMINOUS WITH THE JURISDICTION VESTED IN THE ASSES SING OFFICER UNDER SECTION 154 FOR MAKING OBVIOUS CORRECTIONS, AS NO ITEM OF DEBATABLE NATURE CAN BE CORRECTED UNDER SECTION 154 OF THE ACT. SIMILARLY, THE ASSESSING OFFICER CANNOT ENTER INTO ANY CONTROVERSI AL ITEM TO MAKE PERMISSIBLE ADJUSTMENTS UNDER THE PROV ISO TO SECTION 143(1)(A). THE ONLY REQUIREMENT OF SECTION 147 IS THAT ASSESSI NG OFFICER MUST HAVE GOOD REASON TO BELIEVE THAT SOME INCOME HAD ESCAPED ASSESSMENT. ONE THIS BELIEF IS W ELL- FOUNDED, RECOURSE TO REASSESSMENT PROCEEDINGS CANNO T BE SAID TO BE ILLEGAL. SO LONG AS THE INGREDIENTS O F SECTION 147 ARE FULFILLED, THE ASSESSING OFFICER IS FREE TO 17 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) INITIATE REASSESSMENT PROCEEDINGS AND FAILURE TO TA KE STEPS UNDER SECTION 143(2) WILL NOT RENDER THE ASSESSING OFFICER POWERLESS TO INITIATE THE REASSES SMENT PROCEEDINGS. 30. THE HON'BLE PATNA HIGH COURT (RANCHI BENCH) IN THE CASE OF DEEPAK KUMAR PODDAR & OTHERS VS UNION OF INDIA AND OTHERS, 224 ITR 95, HAS HELD AS UNDER: FOLLOWING THE FILING OF RETURNS BY THE ASSESSEES F OR THE ASSESSMENT YEAR 1992-93, NOTICES WERE ISSUED TO THE M UNDER SECTION 143(2) OF THE INCOME-TAX ACT, 1961. WHILE THE PROCEEDINGS IN TERMS OF SECTION 143(3) OF THE ACT WERE PENDING PURSUANT TO THE NOTICES, ON THE BA SIS OF THE MATERIALS SEIZED IN THE COURSE OF A SEARCH A T THE PETITIONERS' PREMISES, THE ASSESSING OFFICER FOUND THAT THERE WERE SUFFICIENT GROUNDS FOR INITIATING PROCEE DINGS UNDER SECTION 147 AND HENCE NOTICES UNDER SECTION 1 48 OF THE ACT WERE ISSUED TO THE PETITIONERS. IN WRIT PETITIONS, THE PETITIONERS CONTENDED THAT IT WAS NO T OPEN TO THE ASSESSING OFFICER TO INITIATE PROCEEDINGS UN DER SECTION 147 AND ISSUE NOTICES UNDER SECTION 148 OF THE ACT BEFORE CONCLUDING THE PROCEEDINGS UNDER SECTION 143(3) AND WITHOUT PASSING A FINAL ORDER IN THOSE PROCEEDINGS; AND THAT EXPLANATION 2(B) TO SECTION 1 47 DID NOT APPLY TO SCRUTINY CASES: HELD, _ DISMISSING THE PETITIONS, THAT A PROVISION CANNOT, CONTRARY TO ITS PLAIN MEANING, BE GIVEN A LIMITED MEANING ON THE BASIS OF THE EXPLANATORY NOT E SUBMITTED BEFORE PARLIAMENT AT THE TIME OF PRESENTA TION OF THE BILL. EXPLANATION 2(B), THEREFORE, WAS APPLI CABLE TO SCRUTINY CASES. MOREOVER, EVEN THE EXPLANATORY N OTE DID NOT SAY THAT EXPLANATION 2(B) TO SECTION 147 WO ULD APPLY ONLY TO THE 'NON-SCRUTINY' CASES OR THAT CASE S PICKED UP FOR SCRUTINY WOULD NOT BE COVERED BY IT. 31. IN THE CASE OF PRAMOD KUMAR RAKESH KUMAR & CO. & OTHERS, 186 ITR 637, THE HON'BLE ALLAHABAD HIGH COU RT HAS HELD AS UNDER: IN THE ABSENCE OF ANY SPECIFIC PROVISION IN THE CIRCULARS ISSUED BY THE CENTRAL BOARD OF DIRECT TAX ES WE ARE NOT INCLINED TO HOLD THAT JUST BECAUSE AN 18 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) ASSESSMENT WAS MADE UNDER SECTION 143(1)(A) ON THE BASIS OF THE RETURNS SAID TO HAVE BEEN FILED UNDER THE AMNESTY SCHEME, THE POWER OF THE INCOME-TAX OFFICER UNDER SECTIONS 147 AND 148 IS TAKEN AWAY. IT IS, THEREFORE, NOT POSSIBLE FOR US TO QUASH THE IMPUGNE D NOTICES ON THE SAID GROUND. 32. IN THE CASE OF JORAWAR SINGH BAID VS ACIT, 198 ITR 47 (CAL), IT WAS HELD AS UNDER: IN OUR VIEW, THE POWER THAT CAN BE EXERCISED UNDER SECTION 143(2) TO CORRECT THE ASSESSMENT MADE UNDER SECTION 143(1) DOES NOT EXCLUDE THE POWER OF THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT UNDER SECTION 147 IF THE INGREDIENTS OF SECTION 147 ARE SATISFIED. IT IS OPEN TO THE ASSESSING OFFICER TO I NVOKE THE JURISDICTION UNDER SECTION 147, NOTWITHSTANDING THE FACT THAT THERE ARE OTHER REMEDIES OPEN TO HIM UNDE R THE ACT. IT CANNOT, THEREFORE, BE ACCEPTED THAT THE REASSESSMENT UNDER SECTION 147 IS VITIATED BECAUSE THE ASSESSING OFFICER FAILED TO INVOKE HIS POWER TO COR RECT THE ASSESSMENT ALREADY COMPLETED UNDER SECTION 143( 1) BY ISSUING A NOTICE UNDER SECTION 143(2) OF THE ACT . 33. IN THE CASE OF MAHANAGAR TELEPHONE NIGAM LTD VS CBDT, 246 ITR 173 (DELHI) IT WAS HELD AS UNDER: ANOTHER PLEA TAKEN BY THE PETITIONER WAS THAT WITH IN THAT PRESCRIBED TIME LIMIT ACTION FOR ASSESSMENT UN DER SECTION 143(3) WAS NOT TAKEN. WE FIND NO SUBSTANCE IN THIS PLEA. SO LONG AS THE INGREDIENTS OF SECTION 147 ARE FULFI LLED, THE ASSESSING OFFICER IS FREE TO INITIATE TO PROCEED U NDER SECTION 147 AND FAILURE TO TAKE STEPS UNDER SECTION 143(3) WILL NOT RENDER THE ASSESSING OFFICER POWERLESS TO INITIATE REASSESSMENT PROCEEDINGS EVEN WHEN INTIMATION UNDER SECTION 143(1) HAD BEEN ISSUED. A SIMILAR VIEW HAS BEEN TAK EN IN A. PUSA LAL V. CIT [1988] 169 ITR 215 ( AP) ; JORAWAR SINGH BAID V. ASST. CIT [1992] 198 ITR 47 ( CAL) AND PRADEEP KUMAR HAR SARAN LAL V. ASSESSING OFFICER [1998] 229 ITR 46 ( ALL). 19 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) 34. THE DECISION OF THE HON'BLE MADRAS HIGH COURT (SINGLE MEMBER) IN THE CASE OF SRI KRISHNA MAHAL VS ACIT, 250 ITR 333 WAS AFFIRMED BY DIVISION BENCH IN THE JUDGMENT RE PORTED IN 257 ITR 283. 35. THE ITAT DELHI (SPECIAL BENCH) IN THE CASE OF MOTOROLA INC. VS DY. CIT, 95 ITD 269, ALSO DID NOT HAVE THE BENEFIT OF DECISION OF HON'BLE SUPREME COURT IN THE CASE OF A CIT VS RAJESH JHAVERI STOCK BROKERS P. LTD, FURTHER, IT WAS ON A DIFFERENT PROPOSITION. IT WAS HELD THAT IF AN ASSESSEE FILES RETURN VOLUNTARILY WITHIN TIME PERIOD UNDER SUB-SECTION (4) OF SECTIO N 149 THEN ASSESSING OFFICER CANNOT PROCEED U/S 147/148 AGAINS T SUCH ASSESSES 36. ON THE BASIS OF OVERWHELMING AUTHORITIES ON TH E SUBJECT AS REFERRED TO ABOVE, WE HOLD THAT NOTICE ISSUED U/S 1 48(1) CAN BE ISSUED EVEN WHERE NOTICE U/S 143(2) HAS BEEN PENDIN G AND NOT CLOSED . WE HOLD THAT BY PROCESSING THE RETURN AND BY ISSUING ACKNOWLEDGEMENT AS TOKEN OF ACCEPTING THE RETURN, T HE PROCEEDINGS INITIATED BY FILING THE RETURN ARE TERMINATED AND N O PROCEEDINGS THEREFORE, REMAIN PENDING. IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI CASE I TSELF THAT INTIMATION IS NOT AN ASSESSMENT. FOLLOWING THE ABO VE PROPOSITION OF LAW, AS SENDING OF INTIMATION OR ISSUING ACKNOW LEDGEMENT IS NOT AN ASSESSMENT, PROCEEDINGS INITIATED BY FILING THE RETURN OF INCOME ARE CONCLUDED WHEN RETURN IS PROCESSED AND/OR ACKNO WLEDGEMENT IS ISSUED AS TOKEN OF ACCEPTANCE OF THE RETURN. NO PROCEEDING IS PENDING THEREAFTER AND ALSO NO ASSESSMENT IS MADE I N VIEW OF INTERPRETATION OF THE TERM INTIMATION BY APEX COU RT. THIS SITUATION IS DIRECTLY COVERED IN EXPLANATION 2(B) T O SECTION 147 AND THEREFORE, ISSUANCE OF NOTICE U/S 148(1) AFTER PRO CESSING IS COMPLETED/ACKNOWLEDGMENT ISSUED WOULD BE COVERED BY THE DEEMING PROVISION IN EXPLANATION 2(B). THE ARGUMEN T OF LD. AR THAT RE-ASSESSMENT PRESUPPOSES THAT ASSESSMENT SHOU LD HAVE BEEN FRAMED AND INTIMATION IS NOT AN ASSESSMENT, THEREFO RE, ASSESSMENT IS NOT FRAMED AND THEREFORE, RE-ASSESSMENT COULD NOT BE INITIATED IS NOT ACCEPTABLE BECAUSE DEEMING PROVISION OF EXPL ANATION 2(B) TO SECTION 147 DOES NOT CONTEMPLATE THAT AN ASSESSMEN T OF THE NATURE AS DONE U/S 143(3) SHOULD BE COMPLETED FOR INVOKIN G THAT CLAUSE OF THE EXPLANATION. IT ONLY SAYS THAT THE ASSESSEE HAS UNDER STATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION , ALLOWANCE OR RELIEF IN THE RETURN. THUS, ASSESSING OFFICER HAS TO ONLY POINT OUT, OR IT SHOULD COME TO HIS NOTICE ON THE BASIS OF EXA MINATION OF THE 20 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) RETURN THAT ASSESSEE HAS UNDER-STATED THE INCOME OR CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF. IT NOWHERE PRESUPPOSES THAT ASSESSMENT OF THE TYPE PRESCRIBED U/S 143(3) SHOULD HAVE BEEN COMPLETED FOR DEEMING ESCAPEMENT O F INCOME. THE WORD ASSESSMENT HAS NOT BEEN USED AT ALL IN E XPLANATION 2(B), THEREFORE, IT WILL OVER ALL THE SITUATIONS W HERE ASSESSMENT IS NOT FRAMED. THIS SITUATION WILL INCLUDE THE SITUA TION WHERE ONLY INTIMATION IS SENT OR PROCESSING IS DONE OR EVEN N OTHING IS DONE AFTER FILING THE RETURN. THE OPENING WORDS OF SECT ION 147 IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY IN COME CHARGEABLE TO TAX HAS ESCAPED THE ASSESSMENT FOR ANY ASSESSMEN T YEAR .. CANNOT BE READ WITHOUT CONSIDERING EXPLANATION 2 WH ICH DEFINES AND PRESCRIBES THE SCOPE AND LIMIT OF ALL DEEMED ES CAPEMENT OF INCOME UNDER THE SITUATION MENTIONED IN THREE CL AUSES. 37. THUS, WE REJECT THE CONTENTION OF THE LD. AR FO R THE ASSESSEE THAT ASSESSING OFFICER COULD NOT HAVE ISSUED THE NO TICE U/S 148(1) WITHIN TWELVE MONTHS OF FILING OF THE RETURN WHICH IS THE PERIOD WHEN ASSESSING OFFICER SHOULD HAVE ISSUED NOTICE U/ S 143(2) WHICH HAS NOT BEEN ISSUED. 38. THERE IS ONE MORE ASPECT IN THIS ISSUE WHICH R EQUIRES CONSIDERATION. ON MORE CONDITION IS APPARENTLY PRO POSED TO BE INSERTED IN SECTION 147 BY READING INTO IT THE P ROVISIONS OF SECTION 143(2) THAT, IF TIME PERIOD FOR ISSUANCE OF NOTICE U/S 143(2) HAS NOT EXPIRED THEN NOTICE U/S 148(1 ) COULD NOT BE ISSUED. SECTION 147 IS A PROCEDURE FOR ASSESSING ESCAPED IN COME (ORIGINAL OR DEEMED) AND FOR THIS, IT HAS PRESCRIBED CONDITI ON FOR CONFERRING JURISDICTION ON THE ASSESSING OFFICER. THIS IS A C OMPLETE CODE IN ITSELF AND IF CONDITIONS LAID DOWN IN SECTION 147 A RE SATISFIED THEN TO LOOK ELSEWHERE AS TO WHETHER OTHER CONDITIONS LA ID DOWN IN OTHER PROVISIONS ARE FULFILLED OR NOT AND THEREBY TO DECI DE WHETHER THE ASSESSING OFFICER COULD HAVE ASSUMED JURISDICTION U /S 147/148 INSPITE OF CONDITIONS LAID DOWN IN THIS SECTION IS TOTALLY FULFILLED WILL NOT BE LEGALLY CORRECT. IN OUR CONSIDERED VIEW, IN THE MATTER OF JURISDICTION, THE PROVISION SHOULD BE CONSTRUED STR ICTLY. IT CAN NEITHER BE EXTENDED NOR REDUCED BY READING OTHER PR OVISIONS INTO THE PROVISIONS OF SECTION 147, UNLESS IT IS SO SPEC IFICALLY PROVIDED EITHER IN OTHER SECTIONS OR IN SECTION 147. AS A R ESULT, WE HOLD THAT ISSUANCE OF NOTICE U/S 148(1) WAS VALID. THE APPEA LS WILL BE POSTED FOR HEARING ON MERITS. 21 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) 16. WE THEREFORE HOLD THAT ISSUANCE OF NOTICE UNDER SECTION 148 WAS VALID AS IT WAS WITHIN 4 YEARS OF THE ASSESSMENT YE AR IN QUESTION AND IS COVERED BY EXPLANATION 2 TO SECTION 271(1)(C). 17. REGARDING MERIT OF THE CASE , WE ARE OF THE VIE W THAT ASSESSEE HAS FAILED TO FURNISH ANY EVIDENCE REGARDING CASH CREDI TS, THEREFORE ADDITION OF RS. 1,40,000/- WAS JUSTIFIED. REGARDING OPENING CA PITAL, WE ARE OF THE CONSIDERED VIEW THAT IT WOULD MEET THE END OF THE J USTICE, IF, OPENING CAPITAL OF RS. 1,50,000/- IS ACCEPTED AS EXPLAINED. THE ASSESSEE IS DOING BUSINESS IN THE PAST, THEREFORE IT IS REASONABLE TO PRESUME TO HAVE SOME CAPITAL WITH HIM. THIS WILL RESULT IN FURTHER RELI EF OF RS. 70,000/-. 18. REGARDING REPAYMENT OF LOAN WE AGREED TO LD CIT (A) THAT ASSESSEE HAS SATISFACTORY EXPLAINED THE AVAILABILITY OF MONE Y FROM CURRENT PROFITS AND ALSO RECEIPT OF REFUND FROM THE SELLER OF THE C AR. ACCORDINGLY, THE RELIEF ALLOWED BY THE LD CIT(A) IS CONFIRMED. SIMI LARLY, DISALLOWANCE OF RS. 20,000/- OUT OF CLAIM OF EXPENDITURE IS ALSO CO NSIDERED REASONABLE AND HENCE CONFIRMED. 19. AS A RESULT, APPEAL FILED BY THE REVENUE IS DIS MISSED, WHEREAS APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DATED 11 TH DECEMBER, 2009. SD/- SD/- (T.K. SHARMA) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTA NT MEMBER AHMEDABAD; DATED: 11/12/2009 ANKIT* COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 22 ITA NO.1022/AHD/2003 ITA NO. 1118/AHD/2003 (ASSESSMENT YEAR 1999-2000) 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT, 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD.